Former finance minister P Chidambaram calls demonetisation the worst thing to have happened to the Indian economy, questions the economics of the idea
P Chidambaram fielded questions on demonetisation at the Prof DT Lakdawala lecture at the Mumbai University’s campus in Fort
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Try as he might, former finance minister P Chidambaram can’t veer away from the hot button topic of demonetisation, criticising the move as the worst thing to have happened to the Indian economy. He was addressing the Prof DT Lakdawala lecture organised by the department of economics at the Mumbai University’s Fort campus.
Money talks
Though he glossed over the subject in his speech on ‘25 years of economics reforms and the challenges ahead’, he responded squarely to the queries when the floor was thrown open to questions. On being asked if the move would yield any long-term benefits, he shot back: “All cash is not black money. Whoever came up with the idea does not know elementary economics. Just as all cash is not black money; all black money is not cash. Only 6 per cent of it is in cash. It is also not kept in stock and keeps flowing. How does the government plan to get a hold on black money with the demonetisation move? Instead, it has become a reason of suffering for many while standing in queues without even having any connection with the said black money.”
He then launched into further explanation, and said, “For example, there is a farmer who has R5,000. It is in cash, but is not black money. He goes to a doctor and pays R1,000 in cash as fee, but the doctor does not give him any receipt against it so that becomes black money. But, when this doctor goes to a restaurant and pays the R1,000 against a bill, it is no longer black money. So what has the government achieved until now?”
'Surgery without knowledge'
Chidambaram then went on to compare demonetization to surgery done without any knowledge of the illness or which part of the body it is needed on.
He said, “Imagine a doctor conducted a surgery, but there was no information about the patient’s illness. The doctor did not know which part was affected, so conducted the surgery on some completely different part. It is tragic how farmers, self-employed people and small-scale businesses are the ones, which are worst affected due to this move. The government needed to be more sensible about it.”
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